Brazil's Rain Outlook and Tariff Dynamics Weigh on Global Coffee Markets

The coffee commodity complex experienced significant pressure on Wednesday, driven by converging weather and geopolitical factors affecting global supply and demand dynamics. January robusta futures declined sharply, while near-term arabica contracts faced substantial headwinds as market participants reassess fundamental conditions across major producing regions.

Weather-Driven Price Pressure

Climatempo’s forecast of substantial precipitation across Brazil’s key coffee-growing zones through next week triggered immediate selling pressure. The anticipated rainfall, while beneficial for crop development, signaled improving growing conditions that could support larger harvests. This proved bearish for near-term price momentum, as participants rotated positions ahead of the potentially supportive meteorological news.

The rainfall pattern represents a critical variable in the global arabica supply equation. Just days earlier, data from Somar Meteorologia highlighted that Minas Gerais—responsible for a substantial portion of global arabica output—had received precipitation significantly below historical norms during the November 14 week, capturing only 42% of average rainfall levels. The latest forecast suggests a reversal of this dry trend.

Tariff Impacts Constraining Physical Supply

The Trump administration’s trade policies on Brazilian coffee continue reshaping import dynamics and inventory levels. While the administration removed 10% reciprocal tariffs on non-domestically produced commodities, Brazilian coffee remains subject to a separate 40% tariff imposed on “national emergency” grounds. This distinction creates ongoing uncertainty for US importers, as clarification on exemptions remains pending.

The tariff environment has materially compressed US coffee procurement from Brazil. During the August-October period when tariffs took effect, US purchases of Brazilian coffee fell 52% year-over-year to approximately 984,000 bags. Given that roughly one-third of America’s unroasted coffee originates from Brazil, this import shift carries substantial downstream consequences for domestic supply availability.

ICE Inventories Signal Tightness

Physical market tightness appears evident in monitored warehouse stocks. ICE arabica inventories declined to a 1.75-year low of 396,513 bags by Tuesday, reflecting reduced new purchasing activity among US buyers deterred by tariff considerations. Robusta inventories similarly compressed to a 4-month low of 5,648 lots on Monday. These inventory metrics, combined with the January hammer effect in near-term contracts, underscore the constrained supply picture underpinning price support.

Production Forecasts Create Mixed Signals

Long-term supply considerations paint a more complex picture. StoneX projects Brazil will produce 70.7 million bags in the 2026/27 marketing year—a 29% year-over-year increase—with arabica output reaching 47.2 million bags. Conversely, Conab had previously cut its 2025 arabica estimate by 4.9% to 35.2 million bags, suggesting near-term constraints preceding any production recovery.

Vietnam’s expanding coffee production capacity presents another supply dynamic. The Vietnam National Statistics Office reported January-October 2025 exports rose 13.4% year-over-year to 1.31 million metric tons. Production for 2025/26 is projected to climb 6% year-over-year to 1.76 million metric tons, marking a 4-year high and reflecting Vietnam’s dominance in global robusta supply.

Global Supply-Demand Assessment

The International Coffee Organization reported that global coffee exports for the current marketing year declined 0.3% year-over-year to 138.658 million bags, suggesting emerging supply constraints at the global level despite Vietnam’s production expansion. The USDA Foreign Agriculture Service forecasts world coffee production in 2025/26 will increase 2.5% year-over-year to a record 178.68 million bags, though arabica output is expected to decrease 1.7% while robusta rises 7.9%.

The competing supply narratives—tighter near-term availability balanced against anticipated medium-term production increases—create the fundamental framework for price formation. Market participants must weigh immediate tariff-induced inventory constraints and favorable Brazilian weather conditions against longer-term production recovery signals emanating from major producing regions.